New York Law Journal: City’s Credit Law Tackles Serious Discrimination (Letter to the Editor)

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By Sarah Ludwig and Andy Morrison

The article, “City’s New Credit Check Law Is Unnecessary” (NYLJ, Aug. 13, 2015), unfortunately gets a whole lot wrong about New York City’s newly-enacted employment credit checks ban, which goes into effect Sept. 3. First, the authors erroneously claim that in passing the country’s strongest employment credit checks ban, the city council glossed over carve-outs found in other city and state employment credit check laws. In fact, the council dedicated considerable attention, over a three-year period, to analyzing employment credit check bans in other jurisdictions, and found that most exemptions were based not on sound public policy but were the outcome of industry pressure. In Illinois, legislators are on record complaining that officials from TransUnion, one of the nation’s “Big 3” credit reporting agencies, made several unscrupulous efforts to gut their bill.

Ironically, it was also an official from TransUnion who in 2010 admitted under oath that, “we don’t have any research to show any statistical correlation between what’s in somebody’s credit report and their job performance or their likelihood to commit fraud.” Which brings us to another fundamental flaw in the article: the authors’ claim that employment credit checks are a “reliable proven predictor” of job performance and risk. Notably, the authors must resort to industry research, by the consumer credit reporting industry, to support their claim, because there exists no peer-reviewed scholarly research showing that information in a person’s credit report is predictive of job performance or likelihood to commit fraud or theft on the job.

In fact, what research has been done in this area suggests just the opposite. A 2012 study of 178 employees at a large financial services corporation published in The Psychologist-Manager Journal found that, “there is no benefit from using credit history to predict employee performance or turnover.” By banning the use of credit checks for nearly all jobs, the city law rightly acknowledges the lack of connection between a person’s credit information and his or her suitability for a job.

The law tackles a serious form of employment discrimination that the Fair Credit Reporting Act is simply unable and in no way intended to address. Because people and communities of color have been disproportionately targeted for predatory and high-cost loans, black and Latino New Yorkers are more likely than their white counterparts to have damaged credit. Banning employment credit checks helps to ensure that all New Yorkers have equal job opportunity.

The article further incorrectly suggests that the city council “plainly disregarded the serious concerns raised by business groups in opposition to the measure.” Far from it. As Kathryn Wylde, president and CEO of the Partnership for New York City, which represented business concerns throughout the policy debate surrounding the bill, told Crain’s the week the bill passed,”there are now exceptions for fiduciary responsibility and for access to sensitive technology data, which are significant.”

There is one thing the authors get right. Exemptions for public positions are unwarranted. While New York City’s new law remains, as the bill’s sponsor Councilmember Brad Lander said, “the strongest bill of its type in the country,” the city must recognize that since there is no evidence linking credit history to job performance, employment credit checks should be impermissible, no matter the job.